Bermuda-based reinsurer Conduit Re has deployed more capital into non-cat classes of business and continues to explore opportunities in increasingly attractive areas, Chief Executive Officer (CEO) Trevor Carvey told Reinsurance News in Monte Carlo.
As the reinsurance industry meets in Monaco for the 2023 edition of the annual Rendez-Vous De Septembre, we spoke with Conduit Re’s CEO about where he sees opportunity in the market.
“We’re really interested in, and we really like the non-cat classes, these are showing a level of margin, be that specialty or some of the casualty classes,” said Carvey. “With the general rate change, and premium level changes we’ve seen in the last couple of years, the non-cat space for us is really attractive.”
He explained that this is an area where Conduit Re has deployed more capital as the company continues to look at opportunities.
“That’s a great place to build an engine for earnings and an engine for growth,” said Carvey.
When underwriting in the non-cat space, continued Carvey, it’s critical to have a strong depth of underwriting expertise.
“You have to have conversations with clients which invariably revolve around wordings and clauses and exclusions and the value of those, as opposed to just what does the model say.
“And that’s where I think reinsurers can differentiate. You need to be able to have a team of people within a reinsurer that can have a conversation with an insurer about the nature of their business which is the subjectivities as well as purely on rate,” he said.
By making sure you recruit around a really broad skillset, reinsurers can really add shareholder value, explained Carvey.
“We said from day one when we were building the reinsurance team at Conduit, we want to make sure we recruit significantly from the insurance market for exactly that reason.
“If you’re writing quota share business a reinsurer needs to build its expertise with people in the team that can have that conversation with the client about this part of the business,” continued Carvey.
While certain non-cat lines are showing a level of margin, and higher rates and profits are also being experienced in the cat space, reinsurers are now also benefitting from improved investment returns in a high interest rate environment, which shows no sign of stopping.
In the past, this has led to business models that were heavily reliant on investment income, but the feeling now is that reinsurers will maintain underwriting discipline and avoid previous mistakes.
For Conduit Re, Carvey emphasised that the focus has always been on the underwriting return.
“When we put our plan together and when we’ve been building our business, we’ve always said that our focus is on the underwriting return,” said Carvey.
“The investment return, if it’s there, it’s always viewed as the cherry on the top. And our view still very much is that over time you can only build a successful reinsurance business that has an adequate underwriting margin,” he concluded.
